February 11, 2002

FEDERAL BELOW-COST SELLING BILL NOW “ON THE TABLE”

Last Tuesday, PMAA made available to SIGMA its proposed federal below-cost-selling legislation. SIGMA will now begin the process of determining our position on the proposal.

By way of background, SIGMA first learned last October that PMAA would be seeking below-cost-selling legislation. We invited PMAA to come to our November convention to discuss their proposal but were told that would be premature. We know some have questioned why SIGMA had not taken a position on the issue, but PMAA made a specific request that SIGMA not take a position on the legislation until they gave us their actual proposal. We have honored that request.

In some respects, we’re disappointed that we did not have the proposal in time for our Legislative Committee meeting two weeks ago. Committee members wanted to discuss it then and did discuss the general topic of below-cost-selling laws, but ended up recommending what PMAA had requested: that we take no position at this time on the subject but remain open to taking a position on any specific proposals. Now that we have a specific proposal, we can address the concrete question rather than the hypothetical.

The Legislative Committee doesn’t meet again until the Spring Convention, and we don’t want to wait until then to begin determining our position. We want the widest possible input from our members, and want to begin collecting that input right away. This is an important issue deserving careful but expeditious consideration. Even though the PMAA has not yet found a legislator in the House or Senate willing to introduce this legislation, we think it would be a mistake to delay in developing our position.

For those reasons, SIGMA has posted the PMAA proposal on our website, together with PMAA’s “talking points” on the subject. We urge all members to click here to review the legislation or click here for PMAA's "talking points" about the legislation. We know that many members already have a philosophical view either generally in favor of or generally opposed to below-cost-selling laws. But not all such laws are the same – for example, which below-cost sales are prohibited and which are permitted? What we need now are your “first-blush” reactions to this specific proposal. Do you think it would help you? Do you think it might hurt you? Or do you see it accomplishing nothing? Please e-mail your response to sigma@sigma.org. We will probably have more specific questions later.

UNDERGROUND TANK ISSUES

Sen. Chafee (R-RI) will be holding a field hearing in Pascoag, RI, on Feb. 25. That is the site of a significant release which contaminated the area’s drinking water supply with MTBE. The hearing will focus on the local situation, tank issues in general, and Sen. Chafee’s proposed tank bill. SIGMA’s First Vice President and Legislative Committee Chairman, Art DeBlois, is being invited to testify on behalf of SIGMA and NACS. On a related topic, the just-released Bush Administration budget for Fiscal Year 2003 (FY03) calls for $73 million to be spent from the federal LUST Trust Fund – the same level as this year. That is less than the interest the fund will accrue in FY02 ($97 million), and far less than the $190 million our industry will pay into the fund in FY02. The projected balance in the fund at the end of FY03 – $2.14 billion – would fund the program for 26 years even without interest or further tax payments! By comparison, the Super-fund fund balance is less than 2.5 times annual spending.

ACTION IN THE SENATE

Last Tuesday, Senate Majority Leader Daschle (D-SD) “pulled the plug” on economic stimulus legislation. Neither Democrats nor Republicans could muster the 60 votes needed for “cloture”. With the death of that bill went plans by Sen. Enzi (R-WY) to introduce an amendment to repeal the Special Occupational Tax (SOT) that is paid by beer and wine retailers. The Senate did agree to a 13-week extension of unemployment benefits, but that was all. The Senate is now working on a farm bill, and is scheduled to take up energy legislation on Thursday, Feb. 14. But that may the day former Enron chairman Kenneth Lay will be on the Hill to testify (or not), so little real action is expected except some political grandstanding and demagoging. And since Congress leaves the 15th for a week-long President’s Day recess, it’s likely any substantive issues will wait until they come back into session on Feb. 25.

MONEY-SAVING AND MONEY-MAKING PROGRAMS

SIGMA’s Board of Directors is pleased to announce the implementation of a new approach to revenue enhancement and cost containment programs for SIGMA members – our first venture into this arena in more than a decade. The overall program will be known as SIGMA’s Strategic Business Alliance. Within the program, SIGMA will develop special relationships with specific vendors of services that offer opportunities for significant improvement to member companies’ bottom lines.

The key to the concept is that the Strategic Business Alliance Partner will offer special discounted rates available ONLY through the SIGMA alliance. SIGMA, in return, will assist in the marketing of the programs. The Board expects this program to be limited in scope, focusing only on superior “deals” that provide real value to members. Two contracts have already been signed – one is being announced this week and the second next week – with other discussions underway.

The Board would be particularly interested in hearing from members about other possible Strategic Business Alliances you think we should undertake – whether you have a specific company in mind, or merely an area where you think the “group buying” clout of SIGMA might offer some potential savings to you.

MONEY ORDERS

SIGMA is excited to announce our first-ever Strategic Business Alliance is a program with Transaction Tracking Technologies Inc. (3T) to provide a highly-profitable money-order processing system at exclusive discount pricing for SIGMA members.

Originally, money-order processing was outsourced to third-party vendors, but their pricing always limited the profit stream. The real opportunity for money-order profit is the float and abandoned property – both of which the third-party vendors kept for themselves. The program offered by 3T allows marketers to become money-order issuers in their own right, thereby controlling the entire profit stream.

Several SIGMA members were already working with the 3T system and were getting excellent results. The SIGMA program mirrors what those members were already getting, at very advantageous pricing. In fact, we believe the savings offered under the SIGMA member discount from this program could more than cover the cost of SIGMA dues for any company with 10 or more outlets! The additional profits from the program itself could mount into the hundreds of thousands of dollars for many members.

3T will be represented at the SIGMA Spring Convention in San Antonio in late April, and that would be an excellent time to get to know their program better. If you “can’t wait” and want to start the process of saving money right away, call 3T toll-free at 877-343-9900 today!

MERGERS AND ACQUISITIONS

Tesoro will buy the California refinery and retail outlets the FTC required Valero to sell as a condition for approval of its acquisition of Ultramar Diamond Shamrock. In another development, Tom O’Malley has acquired a new job as the chairman, CEO, and president of Premcor.

BUSH BUDGET

Last week, the Bush Administration released their proposed budget for FY03. Among items of interest to SIGMA members:

* $591 billion over 10 years in proposed tax relief. This includes making permanent the tax cuts enacted last year, doing a 2-year extension of the Work Opportunity Tax Credit and Welfare-to-Work Tax Credit, and extending the current ethanol tax incentive expiration date by 6 years, from 2004 to 12/31/2010.

* A proposal to take the surplus HazMat Transporter Fees and use them to fund other DOT programs, rather than re-funding the excess and reducing the fees as had been pro-posed by DOT more than a year ago. DOT has backpedaled on the refund idea since last May; we now see why.

OTHER NEWS

SIGMA has co-signed a letter to all members of the House of Representatives, along with PMAA and NACS, urging that the Native American tribal loophole in campaign finance be closed as part of any campaign finance law changes. The loophole is that tribes are considered an “individual” under one part of the law, meaning they can make contributions from their business income, but are not “persons” under another part of the law which imposes a cap of $25,000 on total contributions. Tribes are, however, still limited to $1,000 per candidate per election. It is likely that campaign finance will soon be forced to the House floor for consideration, under a “discharge petition.” . . . The Senate Finance Committee is scheduled to consider tax provisions for an energy bill in a markup session this Tuesday. SIGMA is hopeful it will contain tax incentives for small refiners to meet environmental upgrade requirements. It may also include a biodiesel tax credit – an issue SIGMA does not currently have a position on.